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April 15, 2019

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Supreme Court Hands Victory to Workers in Transportation Company's Pursuit of Arbitration

In a unanimous decision, the U.S. Supreme Court on January 15 dealt a blow to employers in transportation industries, ruling that those workers—including those classified as independent contractors—are exempt from the Federal Arbitration Act (FAA) and cannot be compelled to arbitrate class-action claims.

The plaintiffs in New Prime Inc. v. Dominic Oliveira—truck driver apprentices classified as independent contractors—brought a class action, alleging the company failed to pay them at least minimum wage. New Prime argued that the dispute had to be sent to arbitration. The U.S. Court of Appeals for the First Circuit disagreed and the Supreme Court affirmed, finding that the statutory exemption under Section 1 of the FAA for "contracts of employment of seamen, railroad employees, or any other class of workers engaged in interstate commerce" covers both employees and independent contractors.

In arriving at that decision, the Court, in an opinion written by Justice Neil Gorsuch, applied the "fundamental canon of statutory construction that words generally should be interpreted as taking their ordinary … meaning … at the time Congress enacted the statute." Accordingly, the Court examined the meaning of the term "contracts of employment" and what Congress intended when it passed the FAA in 1925. The Court concluded that the use of the term "worker" and not "employee" in Section 1 evidenced congressional intent to capture all sorts of relationships, not just employer-employee.

Of equal importance, although the company argued that an arbitrator—rather than a court—should have resolved this issue pursuant to the arbitration agreement’s delegation clause, the Court also ruled that courts must determine the threshold issue of whether a contract is covered by the FAA.

Although a narrow ruling, this decision diverges from recent Supreme Court decisions that consistently enforced mandatory arbitration agreements, including Justice Gorsuch's opinion in Epic Systems, Inc. v. Lewis, which upheld the validity of class-action waivers in employment agreements.

In the future, instead of relying on the FAA, transportation companies likely will be forced to look to state statutes to pursue arbitration. In particular, the companies should examine state statutory or decisional law to determine whether a class-action waiver in the arbitration agreement is enforceable. In AT&T Mobility v. Concepcion, the Supreme Court held that such waivers are enforceable under the FAA.

Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
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Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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Steve Suflas, Ballard Spahr Law Firm, Denver, Labor and Employment Litigation Attorney
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Steven W. Suflas is Managing Partner of the Denver and Boulder offices and a nationally recognized thought leader on labor and employment issues. He represents management in all phases of labor and employment matters — from preventative counseling and strategic guidance to collective bargaining, appearances before regulatory agencies, and litigation before courts and administrative agencies. He works closely with employers — both large and small, national, regional, and local — in responding to the daily challenges of the workplace.

Mr. Suflas is known for his litigation work, defending companies in federal and state courts nationwide in both individual and class action lawsuits. He has first chair jury trial experience and has argued cases before federal and state appellate courts. He also has decades of experience litigating unfair labor practice and representation cases before the National Labor Relations Board. Mr. Suflas has represented management at scores of union negotiations and labor arbitrations.

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Mark Levin, Ballard Spahr Law Firm, Litigation Attorney
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Mark J. Levin is known for his work in complex commercial, insurance, and class-action litigation, with particular experience in consumer finance litigation, the structuring and enforcement of consumer arbitration clauses, and the defense of insurance companies in class actions. He testified in 2007 for the lending industry before a subcommittee of the U.S. House Judiciary Committee at an oversight hearing on whether mandatory arbitration in consumer contracts is fair to consumers.

Mr. Levin has represented banks in defending against the first...

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Jessica Federico, attorney, Ballard Spahr Law Firm, Minneapolis, MN
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Jessica Federico is dedicated to providing advice to employers who are navigating the challenging and ever-changing landscape of employment law. She counsels employers on defense of discrimination claims, wage and hour disputes, employee termination, internal I-9 audits, and filing petitions for employment-based immigrant and non-immigrant visas.

Prior to law school Jessica worked for several legal services providers in the Twin Cities, assisting immigrants in removal of defense, family based immigration, and humanitarian relief.

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